Last Update 26 Jun 26
Fair value Increased 20%WAFD: Higher Multiple And Buybacks Will Shape Balanced Return Profile
The analyst price target for WaFd has been revised from $31.00 to $37.25, with analysts citing updated assumptions on the discount rate, revenue growth, profit margin, and future P/E to support the higher valuation.
Analyst Commentary
Recent Street research on WaFd highlights a mix of optimism and caution around the stock's updated valuation framework, with analysts updating their models to reflect changes in discount rate assumptions, revenue expectations, profit margins, and future P/E levels.
Bullish Takeaways
- Bullish analysts see the higher price targets as consistent with their revised assumptions on WaFd's revenue trajectory and profitability, which they believe support a higher justified earnings multiple.
- The updated valuation work reflects confidence that WaFd's current business profile can sustain the earnings base used in analysts' P/E and discounted cash flow models.
- Some bullish analysts frame the higher target range as better aligning WaFd's valuation with peers that have similar profitability profiles and balance sheet characteristics.
- There is a view that the revised discount rate and profit margin inputs leave room for WaFd to justify the updated target if execution on core banking operations remains steady.
Bearish Takeaways
- Bearish analysts point out that the higher price targets rely on specific assumptions around future revenue and margins, which could prove ambitious if operating conditions become more challenging.
- There is caution that using a higher future P/E for WaFd embeds a level of optimism about earnings durability that may not fully account for potential credit or funding pressures.
- Some cautious views focus on the sensitivity of the valuation to the chosen discount rate, noting that modest changes to this input can materially affect the implied fair value.
- Bearish analysts also highlight that with a higher target price band, the margin for error on WaFd's execution and cost control narrows, which could limit upside if results track closer to the low end of expectations.
What’s in the News for WaFd
- WaFd reported net charge-offs of $0.6 million for the second fiscal quarter ended March 31, 2026, compared with $3.7 million for the prior quarter. (Source: Key Developments)
- From January 1, 2026 to May 5, 2026, WaFd repurchased 4,688,109 shares, representing 6.13% of its shares, for $145.24 million under its ongoing buyback program. (Source: Key Developments)
- Since the buyback program announced on February 3, 1995, WaFd has repurchased a total of 84,566,443 shares, representing 97.15% of the authorization, for $1,972.84 million. (Source: Key Developments)
Valuation Changes for WaFd
- Fair Value: The analyst fair value estimate for WaFd has risen from $31.00 to $37.25.
- Discount Rate: The discount rate has increased from 7.46% to 7.90%, a modest upward shift in the required return used in the model.
- Revenue Growth: The assumed revenue growth rate has moved from 7.28% to 5.68%, indicating a lower growth profile in the updated assumptions.
- Net Profit Margin: The profit margin input has been revised from 30.39% to 27.59%, reflecting a slightly leaner profitability assumption.
- Future P/E: The future P/E multiple has increased from 9.12x to 11.48x, implying a higher valuation multiple applied to WaFd's projected earnings.
Catalysts
About WaFd
WaFd is a digitally enabled regional bank focused on serving businesses and consumers across the Western United States.
What are the underlying business or industry changes driving this perspective?
- The Build 2030 shift toward true commercial banking and small business relationships, including reorganized business, corporate and commercial real estate banking teams, positions WaFd to grow higher yielding C&I and CRE loans, supporting faster revenue and earnings growth.
- Ongoing runoff of low yielding single family mortgage loans and redeployment into higher yielding agency mortgage backed securities with no credit risk should structurally lift asset yields and net interest margin over time, improving net income.
- Strategic focus on treasury management, fraud controls and digital tools for business clients, including in house technology from Pike Street Labs and small business platforms like Treasury Express, is likely to deepen relationships and expand low cost deposits, benefiting funding costs and net interest margin.
- Expansion into SBA 504 and 7(a) lending with delegated and preferred lender status, coupled with a growing loan pipeline across multifamily, C&I and construction, supports sustained mid single to low double digit growth in the active loan book, driving revenue and fee income.
- The launch and targeted scaling of WaFd Wealth Management to at least $1 billion of assets under management, alongside growing insurance revenue, diversifies noninterest income streams and can mitigate margin pressure, supporting more resilient earnings.
Assumptions
How have these above catalysts been quantified?
- Analysts are assuming WaFd's revenue will grow by 5.7% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 31.7% today to 27.6% in 3 years time.
- Analysts expect earnings to reach $244.5 million (and earnings per share of $3.8) by about June 2029, up from $237.7 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.7x on those 2029 earnings, down from 11.8x today. This future PE is lower than the current PE for the US Banks industry at 12.2x.
- Analysts expect the number of shares outstanding to decline by 6.22% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.9%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?
- The Build 2030 strategy aims to shift WaFd from a thrift model toward higher yielding commercial and small business banking, with management targeting 8% to 12% growth in the active loan portfolio and a mix improvement in noninterest-bearing deposits. If achieved, this could accelerate revenue growth and expand net interest margin, lifting earnings above current expectations.
- Secular easing in interest rates, combined with WaFd’s asset sensitivity and ability to aggressively reprice deposits downward now that the loan-to-deposit ratio is in the low 90s, may result in faster than anticipated margin expansion as funding costs fall more quickly than asset yields. This could improve net interest income and net income.
- Strong digital capabilities through Pike Street Labs, enhanced small business platforms like Treasury Express and CashFlow Central, and the launch of WaFd Wealth Management with a goal of $1 billion in assets under management create structural advantages in attracting and deepening client relationships. These factors could drive sustained growth in fee income and improve overall profitability and return on equity.
- Intentional runoff of high cost Luther Burbank deposits, redeployment of low yielding single family mortgages into higher yielding agency mortgage backed securities with no credit risk, and a still strong capital and credit profile mean WaFd is positioned to benefit disproportionately from any upturn in loan demand and industry wide bank M&A or deposit insurance reforms. This could support higher valuation multiples and long term earnings growth.
- While credit metrics have modestly deteriorated due to elevated rates and economic uncertainty, net charge offs remain very low and criticized loans are diversified by sector. A sustained environment of easing rates and stable credit quality could reduce credit costs over time and allow more of the bank’s growing revenue base to flow through to net income and margins.
Valuation
How have all the factors above been brought together to estimate a fair value?
- The analysts have a consensus price target of $37.25 for WaFd based on their expectations of its future earnings growth, profit margins and other risk factors.
- In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $886.2 million, earnings will come to $244.5 million, and it would be trading on a PE ratio of 11.7x, assuming you use a discount rate of 7.9%.
- Given the current share price of $38.01, the analyst price target of $37.25 is 2.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.